Audit Final Exam UPDATED ACTUAL
Exam Questions and CORRECT Answers
Which of the following is not one of the four decisions about what evidence to gather and
how much of it to accumulate?
A) Which audit procedures to use
B) Which accounts must agree to the general ledger
C) When to perform the procedures
D) What sample size to select for a given procedure - CORRECT ANSWER✔✔- B
Which of the following is not a characteristic of the reliability of evidence?
A) Effectiveness of client internal controls
B) Education of auditor
C) Independence of information provider
D) Timeliness - CORRECT ANSWER✔✔- B
The auditor must gather sufficient and appropriate evidence during the course of the audit.
Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report. - CORRECT
ANSWER✔✔- D
Which of the following forms of evidence would be least persuasive in forming the auditor's
opinion about marketable securities and other investments held by the company?
A) Responses to auditor's questions by the president and controller regarding the investments
account
B) Correspondence with a stockbroker regarding the quantity of client's investments held in
street name by the broker
C) Minutes of the board of directors authorizing the purchase of stock as an investment
D) The auditor's count of marketable securities - CORRECT ANSWER✔✔- A
,Determine which of the following is most correct regarding the reliability of audit evidence.
A) Information that is indirectly obtained from external sources is the most reliable audit
evidence.
B) Reliability of audit evidence is dependent upon the evidence being subjective.
C) Reliability of evidence refers to the amount of evidence obtained.
D) If internal controls are effective, evidence obtained is more reliable than when the controls
are not effective. - CORRECT ANSWER✔✔- D
To be considered reliable evidence, confirmations must be controlled by:
A) the client's employee responsible for accounts receivable.
B) the external auditor.
C) the client's internal audit department.
D) the client's controller or CFO. - CORRECT ANSWER✔✔- B
A measure of how willing the auditor is to accept that the financial statements may be
materially misstated after the audit is completed and an unqualified opinion has been issued is
the:
A) inherent risk.
B) acceptable audit risk.
C) statistical risk.
D) financial risk. - CORRECT ANSWER✔✔- B
A measure of the auditor's assessment of the likelihood that there are material misstatements
in an account before considering the effectiveness of the client's internal control is called:
A) control risk.
B) acceptable audit risk.
C) statistical risk.
D) inherent risk. - CORRECT ANSWER✔✔- D
When dealing with audit risk:
A) auditors accept some level of risk in performing the audit function.
, B) most risks that auditors encounter are relatively easy to measure.
C) the audit risk model is only used for classes of transactions.
D) most audit firms prefer to use a quantitative assessment for risk - CORRECT
ANSWER✔✔- A
Initial audit planning involves four matters. Which of the following is not one of these?
A) Develop an overall audit strategy.
B) Request that bank balances be confirmed.
C) Schedule engagement staff and audit specialists.
D) Identify the client's reason for the audit. - CORRECT ANSWER✔✔- B
Most auditors assess inherent risk as high for related parties and related-party transactions
because:
A) of the unique classification of related-party transactions required on the balance sheet.
B) of the lack of independence between the parties.
C) of the unique classification of related-party transactions required on the income statement.
D) it is required by generally accepted accounting principles. - CORRECT ANSWER✔✔- B
An official record of meetings of the board of directors and stockholders is included in the
corporate:
A) bylaws.
B) charter.
C) minutes.
D) license. - CORRECT ANSWER✔✔- C
Analytical procedures:
A) are not a type of audit evidence.
B) are not required during the completion phase of the audit.
C) performed during the planning phase of the audit are used as a substantive test in support
of account balances.
D) performed in the completion phase serve as a final review for material misstatements or
financial problems. - CORRECT ANSWER✔✔- D
Exam Questions and CORRECT Answers
Which of the following is not one of the four decisions about what evidence to gather and
how much of it to accumulate?
A) Which audit procedures to use
B) Which accounts must agree to the general ledger
C) When to perform the procedures
D) What sample size to select for a given procedure - CORRECT ANSWER✔✔- B
Which of the following is not a characteristic of the reliability of evidence?
A) Effectiveness of client internal controls
B) Education of auditor
C) Independence of information provider
D) Timeliness - CORRECT ANSWER✔✔- B
The auditor must gather sufficient and appropriate evidence during the course of the audit.
Sufficient evidence must:
A) be well documented and cross-referenced in the audit documents.
B) be based on sources that are external to company.
C) provide evidence that prove or disprove an audit objective/assertion.
D) be persuasive enough to enable the auditor to issue an audit report. - CORRECT
ANSWER✔✔- D
Which of the following forms of evidence would be least persuasive in forming the auditor's
opinion about marketable securities and other investments held by the company?
A) Responses to auditor's questions by the president and controller regarding the investments
account
B) Correspondence with a stockbroker regarding the quantity of client's investments held in
street name by the broker
C) Minutes of the board of directors authorizing the purchase of stock as an investment
D) The auditor's count of marketable securities - CORRECT ANSWER✔✔- A
,Determine which of the following is most correct regarding the reliability of audit evidence.
A) Information that is indirectly obtained from external sources is the most reliable audit
evidence.
B) Reliability of audit evidence is dependent upon the evidence being subjective.
C) Reliability of evidence refers to the amount of evidence obtained.
D) If internal controls are effective, evidence obtained is more reliable than when the controls
are not effective. - CORRECT ANSWER✔✔- D
To be considered reliable evidence, confirmations must be controlled by:
A) the client's employee responsible for accounts receivable.
B) the external auditor.
C) the client's internal audit department.
D) the client's controller or CFO. - CORRECT ANSWER✔✔- B
A measure of how willing the auditor is to accept that the financial statements may be
materially misstated after the audit is completed and an unqualified opinion has been issued is
the:
A) inherent risk.
B) acceptable audit risk.
C) statistical risk.
D) financial risk. - CORRECT ANSWER✔✔- B
A measure of the auditor's assessment of the likelihood that there are material misstatements
in an account before considering the effectiveness of the client's internal control is called:
A) control risk.
B) acceptable audit risk.
C) statistical risk.
D) inherent risk. - CORRECT ANSWER✔✔- D
When dealing with audit risk:
A) auditors accept some level of risk in performing the audit function.
, B) most risks that auditors encounter are relatively easy to measure.
C) the audit risk model is only used for classes of transactions.
D) most audit firms prefer to use a quantitative assessment for risk - CORRECT
ANSWER✔✔- A
Initial audit planning involves four matters. Which of the following is not one of these?
A) Develop an overall audit strategy.
B) Request that bank balances be confirmed.
C) Schedule engagement staff and audit specialists.
D) Identify the client's reason for the audit. - CORRECT ANSWER✔✔- B
Most auditors assess inherent risk as high for related parties and related-party transactions
because:
A) of the unique classification of related-party transactions required on the balance sheet.
B) of the lack of independence between the parties.
C) of the unique classification of related-party transactions required on the income statement.
D) it is required by generally accepted accounting principles. - CORRECT ANSWER✔✔- B
An official record of meetings of the board of directors and stockholders is included in the
corporate:
A) bylaws.
B) charter.
C) minutes.
D) license. - CORRECT ANSWER✔✔- C
Analytical procedures:
A) are not a type of audit evidence.
B) are not required during the completion phase of the audit.
C) performed during the planning phase of the audit are used as a substantive test in support
of account balances.
D) performed in the completion phase serve as a final review for material misstatements or
financial problems. - CORRECT ANSWER✔✔- D
